Dr David White: Pensions and Scottish independence

Pensions have been a much-discussed issue in the referendum campaign. Picture: TSPL

DR DAVID WHITE

THE No campaign seems to have made it a tactic to repeat the same claims of the doom-laden consequences of independence, regularly and monotonously, even when these have been shown to be unfounded – sometimes even when members of their own side have provided the evidence that refutes them.

A recurring example of this concerns pensions, the issue that came second (after the economy) in a recent BBC survey of what mattered most to voters in the referendum debate.

In May, Ian Davidson, one of the most vociferous anti-independence Labour MPs, asked UK Pensions Minister Steve Webb whether pensioners in an independent Scotland would be guaranteed their state pensions and whether those pensions would be paid at the same rate as in the rest of the UK. The minister replied unambiguously: ‘Yes.’

Webb then went on to say: ‘Citizenship is irrelevant. It is what you have put into the UK National Insurance system prior to separation.’

So, end of that debate, or so you might think. Still , we heard reports of ‘concerns’ about the payment of the state pension – ‘concerns’, of course, which the No campaign stoke remorselessly. It is as if the UK Pensions Minister had never spoken.

An example of the effect this is creating occurred when an acquaintance was out campaigning for a Yes vote. At one door, as soon as he mentioned he was in favour of independence, the home-owner said: ‘Keep your hands off my pension,’ and closed the door. Pensions matter greatly. In particular they matter greatly to an age cohort whose propensity for voting Yes is currently lower than people further away from retirement.

‘Repetition tactics’

It seems to be a further tactic of the No campaign to grind down interest in the referendum, to bore people, and to deaden their critical faculties by droning on about currency union, EU membership and other issues which most ordinary people begin to blank after a certain amount of exposure.

Repetition is part of that tactic, and it also serves to subliminally register its message when people are so turned off by the dreariness that their subconscious only registers the headlines. Negativity is a particular hallmark of the pension issue, although recently Nicola Sturgeon has been emphasising the likelihood that pensions will be £5 per week higher in an independent Scotland after 2016 when the new UK system comes into force.

This is a productive development from the Yes perspective, not just because it offers a better deal for Scottish pensioners, but because it shifts the focus away from the availability and reliability of pension payments in an independent Scotland towards an aspirational goal, albeit a fairly modest one. There is little more that can be added about the security of pensions beyond repeating and enlarging upon what the UK government has said about the guarantee of post-independence state pensions. However, there is a lot that can be talked about regarding the level of payment. Much of this will surely be of great interest to those about to receive a state pension and those already in receipt of it.

While the state pension in the UK is currently £113 per week and set to rise to £155 in 2016, in Ireland it is already £174 per week, and in Norway the minimum state pension is an impressive £330 each week. This may have something to do with the fact that Norway has a Sovereign Wealth Fund founded upon careful husbanding of the revenues from its oilfields.

Pensions league table makes for grim reading

Citing actual amounts of state pension paid in other developed nations is one way of expressing how poor UK state pensions are, but a league table of European pensions as a percentage of average earnings is even more revealing. The British state pension is the lowest in the European Union. It amounts to only 33 per cent of the average wage, while in Italy pensioners receive 70 per cent, in Austria 77 per cent and the Netherlands 91 per cent. Our proportion is on a par with Mexico, not really a shining example of a state that provides well for its citizens. Is this an instance of being better together?

Surely we can do better than languishing bottom of the pensions’ league. If that is all that the talk of broad shoulders and sharing resources has produced, then telling us we should not risk losing such rock-bottom benefits is setting dismally low standards and shows a depressing lack of aspiration.

A further factor which No supporters always fail to mention when spreading fear about the security of state pensions is that there is no UK pension fund or state pension pot. Not a penny of all those National Insurance payments you’ve been making all your life has been saved or invested. Nothing. Whitehall ever only retains an amount sufficient to pay for the next 12 months’ pensions.

Indeed, that current sum is presently on loan to the Treasury to help service the colossal national debt of the UK. The phrase “robbing Peter to pay Paul” springs to mind. All state pensions are now effectively funded from general taxation (and borrowing). In other words, if you are a pensioner, you should be aware that the government at this moment has no money put by to ensure that you will be paid - next year’s payments are awaiting receipt of future taxes. If that is the security being offered by the much vaunted pooling of resources, then it’s not a terribly reassuring one.

So, no pension pot and no oil-revenue-funded Sovereign Wealth Fund, leaving us with precisely zero in the bank despite billions of pounds of National Insurance contributions and 35 years of oil revenues amounting to roughly £300,000,000,000. The entirety of North Sea oil receipts that went to London were blown by successive governments.

No national oil fund

Adam Smith would turn in his grave at the blinkered lack of financial prudence and the reckless failure to invest for the future. Aside from Iraq, Britain is the only oil-producing country in the world which has not set up a national fund using its oil revenues. Returning again to Norway, this small country of five million people (same size and geographical location as Scotland) now owns 2 per cent of all the world’s stocks and shares because it did invest the money it reaped from its oil windfall.

Successive UK Chancellors thought it was acceptable to spend all that money and allow the wealthy to pay much lower taxes than they do almost anywhere else in Europe – including Germany. Why would we want more of the same poor governance and lack of financial nous that has emanated from Westminster for decades and given us a society of food banks, payday loan companies and the bedroom tax?

An OECD report published in June this year revealed the distressing fact that the least wealthy 20 per cent of the population of the UK are poorer than their equivalent in the rest of Western Europe. While our poor average £9,530 income per year, Germany’s least well-off live on £13,381 and France’s get by on £12,653. Bottom of yet another table. The report usefully adds on the observation that Britain’s least well off are closer to the poorest in the former communist countries of Europe such as Slovakia, Bulgaria and Romania, rather than our nearest neighbours.

What independence offers us is the chance to aspire to something greater, something fairer, something more noble and, yes, something more materially beneficial to almost all of us. That same OECD report mentioned above offered the observation that if the UK’s distribution of income resembled that of the Netherlands or Denmark, 99 per cent of UK households would be better off by about £2,700 per year. It’s worth repeating – 99 per cent would benefit from a degree of wealth redistribution, putting us on a par with two nations whose capitalist credentials are impeccable. Translating that into Scottish terms, 4,950,000 people would benefit from 50,000 sharing their disproportionate share of the nation’s pie more equitably.

Many people are intending to vote Yes in the referendum precisely because they believe that greater social justice is served by greater egalitarianism, and that this is only possible in a polity as small as the Scottish nation. Britain, or at least the massively dominant part that is England, has gone too far down the road of neoliberal economics and seems set to continue that way because of the political nature of Westminster - and because the London Labour Party feels obliged to appeal to middle England while the Conservative Party appeases those tempted by the siren song of the dramatically right-wing UKIP.

By contrast, we in Scotland cast our votes overwhelmingly for parties of a social democratic and socially liberal hue – the Greens, the SNP and the Scottish Labour Party (despite its current leadership being in thrall to its London bosses). Rarely in history has a nation witnessed 75 per cent of its population being of such a basically similar political cast of mind.

We have a golden opportunity to put this great reservoir of social cohesion, social generosity and an inherent desire for fairness into practice. In the UK it is submerged by sheer weight of numbers and has almost no hope of realisation in the existing constitutional set-up and political climate.

With a Yes vote we can try to translate that idealistic aspiration into reality. And there is no harm in also mentioning that as part of that objective, we too would like our pensioners to be getting European levels of pensions. Aspirational campaigning creates inspirational campaigners, and inspirational campaigns attract great support.

• Dr David White is a historian and vice-chairman of the Open History Society in Scotland

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